Credit scoring — the quantitative and statistical techniques which assess the credit risks when lending to consumers — has been one of the most successful if unsung applications of mathematics in ...
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Credit scoring — the quantitative and statistical techniques which assess the credit risks when lending to consumers — has been one of the most successful if unsung applications of mathematics in business for the last fifty years. Now though, credit scoring is beginning to be used in relation to other decisions rather than the traditional one of assessing the default risk of a potential borrower. Lenders are changing their objectives from minimizing defaults to maximizing profits; using the internet and the telephone as application channels means lenders can price or customize their loans for individual consumers. The introduction of the Basel Capital Accord banking regulations and the credit crunch following the problems with securitizing sub prime mortgage mean one needs to be able to extend the default risk models from individual consumer loans to portfolios of such loans. Addressing these challenges requires new models that use credit scores as inputs. These in turn require extensions of what is meant by a credit score. This book reviews the current methodology for building scorecards, clarifies what a credit score really is, and the way that scoring systems are measured. It then looks at the models that can be used to address a number of these new challenges: how to obtain profitability based scoring systems; pricing new loans in a way that reflects their risk and also customise them to attract consumers; how the Basel Accord impacts on way credit scoring; and how credit scoring can be extended to assess the credit risk of portfolios of loans.Less

Consumer Credit Models : Pricing, Profit and Portfolios

Lyn C. Thomas

Published in print: 2009-01-29

Credit scoring — the quantitative and statistical techniques which assess the credit risks when lending to consumers — has been one of the most successful if unsung applications of mathematics in business for the last fifty years. Now though, credit scoring is beginning to be used in relation to other decisions rather than the traditional one of assessing the default risk of a potential borrower. Lenders are changing their objectives from minimizing defaults to maximizing profits; using the internet and the telephone as application channels means lenders can price or customize their loans for individual consumers. The introduction of the Basel Capital Accord banking regulations and the credit crunch following the problems with securitizing sub prime mortgage mean one needs to be able to extend the default risk models from individual consumer loans to portfolios of such loans. Addressing these challenges requires new models that use credit scores as inputs. These in turn require extensions of what is meant by a credit score. This book reviews the current methodology for building scorecards, clarifies what a credit score really is, and the way that scoring systems are measured. It then looks at the models that can be used to address a number of these new challenges: how to obtain profitability based scoring systems; pricing new loans in a way that reflects their risk and also customise them to attract consumers; how the Basel Accord impacts on way credit scoring; and how credit scoring can be extended to assess the credit risk of portfolios of loans.

This book is the first book of a series of three that provides an overview of all aspects, steps, and issues that should be considered when undertaking credit risk management, including the Basel II ...
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This book is the first book of a series of three that provides an overview of all aspects, steps, and issues that should be considered when undertaking credit risk management, including the Basel II Capital Accord, which all major banks must comply with in 2008. The introduction of the recently suggested Basel II Capital Accord has raised many issues and concerns about how to appropriately manage credit risk. Managing credit risk is one of the next big challenges facing financial institutions. The importance and relevance of efficiently managing credit risk is evident from the huge investments that many financial institutions are making in this area, the booming credit industry in emerging economies (e.g. Brazil, China, India), the many events (courses, seminars, workshops) that are being organised on this topic, and the emergence of new academic journals and magazines in the field (e.g., Journal of Credit Risk,Journal of Risk Model Validation, Journal of Risk Management in Financial Institutions). Financial risk management, an area of increasing importance with the recent Basel II developments, is discussed in terms of practical business impact and the increasing profitability competition, laying the foundation for the other two books in the series.Less

Tony Van GestelBart Baesens

Published in print: 2008-10-23

This book is the first book of a series of three that provides an overview of all aspects, steps, and issues that should be considered when undertaking credit risk management, including the Basel II Capital Accord, which all major banks must comply with in 2008. The introduction of the recently suggested Basel II Capital Accord has raised many issues and concerns about how to appropriately manage credit risk. Managing credit risk is one of the next big challenges facing financial institutions. The importance and relevance of efficiently managing credit risk is evident from the huge investments that many financial institutions are making in this area, the booming credit industry in emerging economies (e.g. Brazil, China, India), the many events (courses, seminars, workshops) that are being organised on this topic, and the emergence of new academic journals and magazines in the field (e.g., Journal of Credit Risk,Journal of Risk Model Validation, Journal of Risk Management in Financial Institutions). Financial risk management, an area of increasing importance with the recent Basel II developments, is discussed in terms of practical business impact and the increasing profitability competition, laying the foundation for the other two books in the series.

Wavelets have become a powerful tool in several applications by now. Their use for the numerical solution of operator equations has been investigated more recently. By now the theoretical ...
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Wavelets have become a powerful tool in several applications by now. Their use for the numerical solution of operator equations has been investigated more recently. By now the theoretical understanding of such methods is quite advanced and has brought up deep results and additional understanding. Moreover, the rigorous theoretical foundation of wavelet bases has also lead to new insights in more classical numerical methods for partial differential equations (pde's) such as Finite Elements. However, sometimes it is believed that understanding and applying the full power of wavelets needs a strong mathematical background in functional analysis and approximation theory. The main idea of this book is to introduce the main concepts and results of wavelet methods for solving linear elliptic partial differential equations in a framework that allows avoiding technicalities to a maximum extend. On the other hand, the book also describes recent research including adaptive methods also for nonlinear problems, wavelets on general domains and applications.Less

Wavelet Methods for Elliptic Partial Differential Equations

Karsten Urban

Published in print: 2008-11-27

Wavelets have become a powerful tool in several applications by now. Their use for the numerical solution of operator equations has been investigated more recently. By now the theoretical understanding of such methods is quite advanced and has brought up deep results and additional understanding. Moreover, the rigorous theoretical foundation of wavelet bases has also lead to new insights in more classical numerical methods for partial differential equations (pde's) such as Finite Elements. However, sometimes it is believed that understanding and applying the full power of wavelets needs a strong mathematical background in functional analysis and approximation theory. The main idea of this book is to introduce the main concepts and results of wavelet methods for solving linear elliptic partial differential equations in a framework that allows avoiding technicalities to a maximum extend. On the other hand, the book also describes recent research including adaptive methods also for nonlinear problems, wavelets on general domains and applications.